GrainCorp
chief
Alison Watkins
was on the phone to Patricia Woertz, her counterpart at Archer Daniels Midland (ADM), early this morning with some bad news.

After weeks of radio silence that gave GrainCorp’s advisers time to assess the value of the company and dig around for some additional cost-savings, Watkins had what was described as a “cordial" chat with Woertz when she told her “thanks but no thanks".

On one hand, GrainCorp says it is not in the frame of mind to consider a bid from anyone, but the wording of its news release makes it look like a very mild rebuff indeed. GrainCorp says the proposal “materially undervalues the company".

The official line is that it has not been soliciting offers, that it wants to push ahead with what it sees as a compelling growth strategy and leverage off its unique position in the region.

Everyone has a price, however, and while ADM’s $2.7 billion approach is not enough, it is clearly open to a higher offer. Watkins will not say how much would be enough to convince her to open the books to ADM but GrainCorp is clearly agitating for an improved offer.

Watkins knows that Decatur, Illinois-based ADM is 10 times the size of GrainCorp and that it can pay more if it wants to. While the board must try to generate the best returns for shareholders possible, it is also keen to see through a strategy that could make it the only large Australian-owned agriculture company left in the ring.

The cracks in her defence are the lack of a rival offer, the hefty premium ADM has offered compared with where the company was previously trading and some question marks over how one values a cyclical company, such as GrainCorp, that is hostage to changing harvests.

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About 30 per cent of the stock has also changed hands since ADM’s brokers snapped up 14.9 per cent. Another 15 per cent or so is held by hedge funds and other parties who are betting on a successful deal.

About 30 per cent of GrainCorp’s stock has changed hands since the approach, adding to the pressure for a transaction.

ADM’s brokers have secured 14.9 per cent of the stock while hedge funds and other parties betting on a short-term gain from any corporate activity have acquired about 15 per cent.

GrainCorp shares rose 3¢ this morning to $12.21, indicating investors still expect a deal. The game is far from over.